Unity's AI Platform Vector Shows Early Wins: Can Growth Accelerate?

Unity Software Inc. U delivered a strong second-quarter 2025, with its newly launched AI-powered ad platform, Unity Vector, emerging as a clear growth catalyst. Vector, a neural network-based upgrade to Unity’s advertising engine, drove 15% sequential growth in the Unity Ad Network during the second quarter of 2025, with management guiding for double-digit sequential gains in the third quarter. This performance comes on top of stabilization in other ad products, setting the stage for mid-single-digit growth across the broader Grow segment.

What makes Vector’s early success notable is its scalability and potential longevity. The platform processes more data types in real time, delivering higher-quality installs and stronger return on ad spend for clients. Unity’s reach, powering 70% of top mobile games, gives Vector unique behavioral data advantages, with the company planning to integrate runtime gameplay insights starting in 2026.

Financially, Unity posted $440.9 million in the second-quarter revenue, down 1.9% year over year but ahead of estimates, while adjusted EBITDA of $90 million reflected 21% margins. Management emphasized that efficiency gains are enabling aggressive reinvestment into Vector and AI content creation without sacrificing profitability.

The key question for investors is sustainability. While Unity’s early Vector adoption is broad-based and cannibalization is minimal (less than 10%), scaling returns across genres, geographies, and advertisers remains a multi-year effort. With high contribution margins and expanding partnerships in gaming, automotive, and healthcare, Unity has the runway to extend Vector’s momentum — but execution in AI-driven ad optimization will determine if these early wins turn into a durable growth engine.

Unity’s Competitive Landscape

Unity’s rapid progress with Vector places it in direct competition with AppLovin Corporation APP and Digital Turbine, Inc. APPS — two established players in the mobile ad tech arena. AppLovin has built its reputation on advanced machine learning algorithms for ad targeting and monetization, with its AXON engine delivering strong advertiser ROI. While AppLovin enjoys scale and a broad advertiser base, Unity’s deep integration into the game development pipeline offers a unique data edge that AppLovin lacks.

Digital Turbine focuses on mobile content discovery and app distribution, working closely with carriers and OEMs to deliver targeted user acquisition campaigns. Like AppLovin, Digital Turbine aims to maximize install quality and advertiser returns, but Unity’s Vector benefits from first-party game runtime data that could give it a stronger long-term advantage. Outpacing AppLovin and Digital Turbine will require Unity to scale Vector’s early performance gains across its entire ad ecosystem.

U Stock’s Price Performance & Valuation Trend

Shares of this California-based software development company have gained 57.8% in the past three months, significantly outperforming the Zacks Internet - Software industry, the Zacks Computer and Technology sector.

Unity Stock’s Price Performance

U stock is currently trading at a premium compared with the industry peers, with a forward 12-month price-to-sales (P/S) ratio of 7.33, as evidenced by the chart below.

Unity’s P/S Ratio (Forward 12-Month) vs. Industry

EPS Trend of Unity Software

Unity’s loss estimates for 2025 and 2026 have narrowed over the past seven days to a loss per share of 79 cents and 64 cents, respectively. Despite indicating losses, the estimated figures for 2025 imply a year-over-year improvement from a loss of $1.68 per share.
 

U stock currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

This article originally published on Zacks Investment Research (zacks.com).

Zacks Investment Research